Car finance

Nancy243

Hi, 
My car finance agreement runs out shortly.  Is it better to trade in for new model and probably  increase monthly payment slightly ( prefer not to) or get a bank loan to pay off the remaining 2500 and keep it?  2016 car, 40000 mileage excellent condition and I like it.  If loan, any suggestions for cheapest over 3 years? Thank you .

[Deleted User]

Depends on your objective.  You can keep spending more and more in newer models, or you can buy a cheap runaround for cash, or anything in between.

If you need a loan, the cheapest one is the cheapest that you're able to get, which may not be the cheapest available.

What do you want to do?

Grumpy_chap

Good morning Nancy, welcome to the forum.

No-one can give you a definitive answer on whether or not to keep your car, or how to finance the next step, but this is a two-stage process.  (I have made some assumptions as you did not mention what type of car it is or how much your monthly payments are now.)

Stage One - decision to keep the car or swap.  In making this decision, you may wish to consider the following points:

• Do you like the car and is it a "good 'un"?  (It sounds like you do and it is.)
• Is the price you need to pay for the car now fair?  (How many other 3 year old cars at 40k miles could you get for the same money?)
• If you do not buy out the current car, what will you do for a car going forwards?  (New car is an option, but you express disinclination to increase monthly payments.)

I know what I would do based upon what you have said in your OP, but this has to be your choice and you have to be happy with it.

Stage Two - how to finance the balloon payment if you decide to keep you car.  You are fortunate that £2.5k is quite a low some, here are some routes to consider:

• Do you have savings available that you can use now and then pay back the savings by maintaining your current car payment, but to your savings account rather than to the finance company?
• Does the car dealer / finance company have on offer available?  Remember, when you talk to them, they will be focused on selling you a new car - do not let them bamboozle you into something you don't wish for.
• Can you cover this with a zero percent purchase credit card and then clear by making your current finance payments to pay down the credit card?  Given typical PCP monthly rates, it could be cleared off in about a year.
• Any other type of unsecured personal loan, enquire at your bank and shop around for the most competitive rate.  Use a comparison website.

The final thing to bear in mind is the decision is not final / forever:

• If you keep the car and pay off the balloon payment, but maintain your current monthly payments to clear the debt, after a year or so, this monthly payment will mean the car is all yours.  It is entirely your choice at that time to keep the car for longer or swap it in whenever you get the urge and comfortable finances for a new car then.  You could then try to keep the monthly payment going into a savings account as well.
• If you swap the car now, you will be back at this decision again in three years' time.

Good luck with your decision and do let us know how you get on.